How to Negotiate Freight Rates – A Tip for Small Carriers

How to Negotiate Freight Rates – A Tip for Small Carriers

Small carriers make up at least 25 percent of the trucks on the road providing freight transportation services. One of the challenges confronting small carrier companies involves negotiating freight rates to their customers. Unlike the bigger Atlanta trucking companies, smaller trucking companies may have no resources available compared to their bigger competitors. Consequently, small trucking businesses often do not have the same leverage as bigger trucking providers.

Small carriers structural work-up

Smaller trucking service providers often find it difficult to negotiate their rates when they are paid according to percentage based on the gross load. Lower rates can affect the profitability of your business, but there are potential solutions that can help you improve your negotiating ability. Even small carriers have their own organizational structures, and each department can contribute in the negotiating process for freight rates to potential customers. There is no doubt that even if small asset-based carriers and trucking companies have limited resources, they remain important in the shipping industry. As businesses grow and expand to cater to regional trading, shipping capacity will never decline.

Improving the pricing-department performance

Every carrier has a pricing department that is responsible for communicating your business to your target market. By way of communication, your goal is to make known the price of your services. Prior to offering your freight charges, make sure to compile an inventory of your costs, including the salary of drivers, truck maintenance, tax liabilities, insurance costs and fuel expenses. Your fuel costs should be dynamically determined because the rate may change often.

These are essential factors to consider so that when your department begins to negotiate with customers, you already know your baseline costs, thereby making negotiation easier. Your customer will always be asking for a discount to lower the charges. By knowing your baseline costs, you will know if you should turn down the negotiation for accepting the load, or if there is room for a freight-rate adjustment that will satisfy your customers.

Building business rapport with brokers, shippers and clients

A good business rapport will enable small carriers to turn down one load offer while at the same time be able to accept another freight service load from the same broker or shipper. It is important to disclose your expectations to your client shippers or broker in order not to offend them for turning down their freight rate. Making them understand your pricing factors will make it easier with the negotiation of your rates that they may consequently find reasonable.

Furthermore, if your company is known for high-quality customer services and modern trucking logistics, it will not be difficult to sell your services. Your clients will be the ones to pursue your rates in order to receive the same service satisfaction that they previously enjoyed. Building honest and reliable trucking services will help you build a track record that makes freight-rate negotiation easier for brokers and shipping companies.

Instill flexibility into your freight rate

While bigger trucking companies are capable of handling larger workloads, they cannot cover all demands for shipping services. That is when small carriers’ services become valuable to fill up the gaps in meeting the freight-transportation demands of many industries. Try to make your services and freight rate highly flexible so as to drive more revenues to your transportation business, and soon enough your clients will find your business highly accommodating with satisfying services so that they become repeat customers and regular clients of your small carrier business.

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Posted in Logistics Solutions

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